basic traing pic

Basic Materials stocks can often times give a decent snap shot of how an economy is doing from a growth or lack of perspective. Below looks at Basic Materials ETF (IYM) over the past decade.

joe friday iym testing breakout levels aug 26

CLICK ON CHART TO ENLARGE

IYM remains inside of an upward sloping mult-year rising channel (1), since 2009. It hit the bottom of this channel earlier this year and has bounced off support. Currently IYM is testing falling resistance as it nears the top of an rising wedge pattern at (2). 

Below looks at IYM -vs.- SPX over the past 15-years-

iym spx ratio testing falling resistance aug 26

CLICK ON CHART TO ENLARGE

The ratio has been declining since the highs in 2011 inside of falling channel (1), reflecting that IYM has under performed the S&P during this time frame. Over the past few months the ratio has moved a little higher and is facing falling resistance at (2).

Joe Friday Just The Facts– IYM and the IYM/SPY ratio are testing falling resistance at this time. For the macro picture to improve, “basically” want basic materials to move higher and breakout.

Risk On trade is stocks would prefer to see Basic Materials show some strength here, as the S&P is within a couple of percent of all-time highs!